Dollar General Corp. (NYSE:DG)

The analysis of the annual financial data reveals distinct trends in the company's profitability, cost of capital, invested capital, and economic profit over the six-year period.

Net Operating Profit After Taxes (NOPAT)

NOPAT demonstrated consistent growth from 2019 through 2023, increasing from approximately $1.98 billion to a peak of about $3.66 billion. However, in 2024 there was a notable decline to approximately $2.43 billion, indicating a reversal from the previously established upward trend.

Cost of Capital

The cost of capital showed a relatively stable pattern with minor fluctuations. It gradually increased from 7.14% in 2019 to a high of 7.44% in 2022 before declining to 6.85% in 2024. This downward adjustment in 2024 could reflect changes in market conditions or the company’s risk profile.

Invested Capital

The invested capital steadily expanded each year, rising from about $18.1 billion in 2019 to $26.3 billion in 2024. This gradual increase suggests ongoing investments to support business growth or operational expansion throughout the period.

Economic Profit

Economic profit exhibited significant variability. It more than doubled from roughly $689 million in 2019 to a peak near $1.89 billion in 2023, signaling strong value creation over this timeframe. However, similar to NOPAT, economic profit sharply decreased to approximately $629 million in 2024, indicating a substantial reduction in profit after accounting for the cost of capital.

Overall, the company experienced strong profitability and value creation growth from 2019 to 2023, driven by increasing NOPAT and invested capital. Despite an initially stable cost of capital, the decline in both NOPAT and economic profit in 2024 may warrant further investigation to understand the underlying causes and to assess the sustainability of recent investments and profit levels.

The annual financial data indicates notable fluctuations in the profitability metrics over the presented periods.

Net Income

Net income showed a consistent increase from February 1, 2019, through January 29, 2021, rising from approximately 1.59 billion US dollars to 2.65 billion US dollars. This upward trend indicates improved profitability during these years. However, in the subsequent years, net income declined, falling to about 2.40 billion US dollars by February 3, 2023, and further decreasing to approximately 1.66 billion US dollars by February 2, 2024. This decline in net income suggests challenges impacting profitability in the most recent years analyzed.

Net Operating Profit After Taxes (NOPAT)

NOPAT similarly displayed an upward trajectory from February 1, 2019, through February 3, 2023. It grew from approximately 1.98 billion US dollars in 2019 to a peak of about 3.66 billion US dollars in 2023. This represents significant improvement in operating efficiency and profitability over this time frame. However, in the latest period ending February 2, 2024, NOPAT declined notably to around 2.43 billion US dollars, indicating a reduction in operating profitability despite the previous gains.

Overall, both net income and NOPAT exhibited substantial growth from 2019 through early 2023, reflecting enhanced financial performance and operational effectiveness. Nevertheless, the data for the most recent year reveals a marked decrease in these key profitability indicators, implying emerging issues or external factors affecting the company’s financial returns. Close monitoring and further analysis may be required to understand the drivers behind this downturn and to assess the company's future profitability prospects.

The data reflects trends in the provision for income taxes and cash operating taxes over a six-year period, from February 2019 to February 2024. Both financial items are presented in thousands of US dollars.

Provision for Income Taxes

The provision for income taxes displayed an overall upward trend between 2019 and 2023, beginning at 425,944 thousand US dollars in 2019 and peaking at 700,625 thousand US dollars in 2023. Specifically, the amount increased steadily from 2019 through 2021, reaching a high of 749,330 thousand US dollars in 2021. After this peak, the provision declined to 663,917 thousand US dollars in 2022, then rose slightly in 2023 before substantially decreasing to 458,245 thousand US dollars in 2024. This pattern suggests variability in tax expense recognition possibly influenced by changes in taxable income or tax planning strategies.

Cash Operating Taxes

Cash operating taxes also followed an increasing trend in the initial years, starting at 457,118 thousand US dollars in 2019 and reaching 823,390 thousand US dollars in 2021. This was followed by a decline in 2022 to 660,916 thousand US dollars and continued decreases through 2023 and 2024, reaching 596,198 thousand and 553,172 thousand US dollars respectively. The decline after 2021 indicates a reduction in actual cash outflows related to income taxes, which may correspond to changes in timing differences or tax provisions to cash payments.

Comparative Insights

Notably, cash operating taxes consistently exceed the provision for income taxes through 2021 but then fall below the provision in 2023 and 2024. This shift indicates a divergence between the tax expense recorded under accrual accounting (provision) and the cash paid for taxes, potentially due to deferred tax assets/liabilities or timing differences in tax payments. The peak of cash operating taxes in 2021, which is significantly higher than both preceding and subsequent years, may reflect a one-time tax payment or adjustment.

Overall, both the provision for income taxes and cash operating taxes exhibit peaks around 2021, followed by notable declines, with cash operating taxes showing a sharper descent. The divergence observed in recent years suggests evolving tax payment patterns and provision estimates that warrant closer examination for their implications on the company's tax strategy and cash flow management.

Total Reported Debt & Leases

The total reported debt and leases exhibit a consistent upward trend over the six-year period. Beginning at approximately $11.1 billion in early 2019, the figure increased steadily each year, reaching around $18.1 billion by early 2024. This represents an overall increase of roughly 63% from 2019 to 2024, with notable acceleration in growth between 2021 and 2023.

Shareholders’ Equity

Shareholders’ equity demonstrated moderate fluctuations with a slight downward trend until 2023, followed by a recovery in 2024. Initially valued at about $6.4 billion in 2019, it increased marginally in 2020 before decreasing progressively to a low of approximately $5.5 billion in early 2023. A rebound occurred in the final year to nearly $6.7 billion, almost recovering the equity levels observed at the beginning of the period.

Invested Capital

Invested capital showed a steady increase throughout the entire period. Starting at approximately $18.1 billion in 2019, it rose gradually each year, reaching about $26.3 billion by early 2024. This constitutes an increase of approximately 45% over six years, indicating continued investment and growth in capital base. The increases are consistent and without significant volatility.

Overall Analysis

The company appears to have increased its leverage significantly, as evidenced by the growing total reported debt and leases, which outpaced the growth in shareholders’ equity. Despite a temporary decline in equity through 2023, the final year saw a recovery to prior levels. The consistent rise in invested capital alongside increasing debt suggests an expansion strategy possibly funded by borrowing. The leverage position warrants monitoring due to the growing debt level relative to equity.

Economic Profit

The economic profit experienced fluctuations over the analyzed periods. It showed a significant upward trend from 689,100 thousand USD in early 2019 to a peak of 1,894,287 thousand USD in early 2023. However, in the most recent period ending February 2024, there was a notable decline to 629,180 thousand USD, marking a substantial decrease compared to the prior year.

Invested Capital

The invested capital demonstrated a steady increase throughout the periods. Starting at 18,107,408 thousand USD in early 2019, it rose consistently each year, reaching 26,309,034 thousand USD by the beginning of 2024. This signifies continued investment and capital allocation growth over the six-year span.

Economic Spread Ratio

The economic spread ratio showed varying trends. It started at 3.81% in early 2019 and advanced to a peak of 7.65% in early 2023, indicating improved efficiency or profitability relative to invested capital. However, this positive trend reversed sharply, falling to 2.39% by early 2024, the lowest point observed in the analysis period.

Overall Observations

The data reflects a period of expansion and increasing returns up to early 2023, with economic profit and economic spread ratio both peaking. Nevertheless, the last period signals a downturn with both economic profit and economic spread ratio declining significantly, despite the continued growth in invested capital. This suggests challenges in generating returns from the increased capital base in the most recent year.

The financial data indicates that net sales of the company have exhibited consistent growth over the six-year period. Starting from approximately 25.6 billion US dollars in early 2019, net sales increased steadily each year, reaching nearly 38.7 billion US dollars by early 2024. This upward trend suggests successful revenue expansion initiatives or market growth over time.

Economic profit also showed a strong positive trajectory from 2019 through 2023, increasing from approximately 689 million US dollars to a peak of around 1.89 billion US dollars in early 2023. However, a significant decline is observed in the most recent year, with economic profit dropping to about 629 million US dollars in early 2024. This sharp decrease indicates that despite higher sales, the company's economic profitability faced considerable pressure or challenges in the latest period.

The economic profit margin, reflecting economic profit as a percentage of net sales, follows a generally improving trend from 2.69% in 2019 and 2020 to a high of 5.01% in 2023. This increase points to more efficient profit generation relative to sales growth over several years. Conversely, the margin declines steeply to 1.63% in 2024, mirroring the downturn seen in absolute economic profit figures and suggesting reduced profitability efficiency or increased costs.

Summary of trends:

- Net sales have consistently increased over the analyzed period, evidencing steady revenue growth.

- Economic profit grew substantially until 2023 but experienced a notable decline in the latest year, signaling a reversal in profitability gains.

- Economic profit margin improved year-over-year from 2019 through 2023, indicating enhanced profitability per sales dollar, then sharply decreased in 2024, suggesting a deterioration in profit efficiency.

Overall, the data reveals sustained sales growth with fluctuating profitability performance, culminating in reduced economic profit and margin in the most recent financial year. This pattern may warrant further investigation into the underlying causes such as cost management, operational challenges, or market conditions affecting profit outcomes despite rising sales.